Private Equity Characteristics and Role in Portfolio Quiz
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Questions and Answers

What is one of the sectors emphasized for growth funds according to the text?

  • Real Estate
  • Oil and Gas
  • TMT (correct)
  • Automotive
  • Which of the following is NOT a stage in a Growth Fund's Sourcing Funnel as described in the text?

  • Deal Structuring
  • Risk Management
  • Deal Origination
  • Customer Service (correct)
  • What is the typical range of returns targeted by growth funds according to the text?

  • 6x to 8x
  • 3x to 5x (correct)
  • 10x to 15x
  • 1x to 2x
  • In what stage of the investment process do growth funds influence strategy, capital allocation, and risk management through board representation?

    <p>Investment Realization</p> Signup and view all the answers

    Which type of firms use a large amount of preferred equity to receive dividends and lower risk as mentioned in the text?

    <p>Private Equity Firms</p> Signup and view all the answers

    What is a common characteristic of middle market and lower middle market transactions mentioned in the text regarding leverage?

    <p>They avoid using leverage due to risk concerns</p> Signup and view all the answers

    What is the typical exit strategy for a private equity investment?

    <p>Sale to a strategic buyer or another private equity firm, or IPO</p> Signup and view all the answers

    Why is private equity often considered illiquid?

    <p>Because the investment requires a commitment period of 6-15 years</p> Signup and view all the answers

    What is the primary source of capital in a 'bootstrap' acquisition?

    <p>Borrowed funds secured by the target company's cash flows</p> Signup and view all the answers

    How does private equity typically contribute to a portfolio's liquidity?

    <p>By adding illiquidity premium and growth potential</p> Signup and view all the answers

    Why is liquidity an important consideration in investment portfolios?

    <p>To be able to quickly convert assets into cash in times of need</p> Signup and view all the answers

    What does it mean to 'sell liquidity' from a portfolio?

    <p>To tie up cash in illiquid investments, making it unavailable for immediate use</p> Signup and view all the answers

    What is considered the most important factor in one manager's methodology for implementation?

    <p>Strategy</p> Signup and view all the answers

    What is the key focus in the 'Talent Magnet' culture mentioned in the text?

    <p>Performance-oriented approach</p> Signup and view all the answers

    What is the crucial aspect to consider in private equity to avoid a major mistake?

    <p>Running out of liquidity</p> Signup and view all the answers

    What type of acquisitions are recommended in the text as a strategy for private equity firms?

    <p>'Add-on' or 'Bolt on' acquisitions</p> Signup and view all the answers

    In private equity, what is emphasized as the primary focus for consistent success?

    <p>'Blocking and tackling'</p> Signup and view all the answers

    What is Martin H. Dubilier's attributed quote warning against in private equity?

    <p>Running out of liquidity</p> Signup and view all the answers

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